Old Republic International Third Quarter 2026 Earnings Conference Call - OLD REPUBLIC INTERNATIONAL CORP

Hello everyone, thank you for joining us and welcome to Old Republic International third quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star 1 again. I will now hand the call over to Joe Calabrese with the Financial Relations Board. please go ahead. Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic Conference Call to discuss third quarter 2026 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated October 22nd, 2026. Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainities, and risk, please refer to the forward-thinking statements discussion in the press release and the company's other recent SEC filings and the risk factors discussed in the company' most recent Form 10-K and other recent SEC filings. You may also include references to net income excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in responses to questions. GAAP reconciliations are included in the press release. Presenting on today's conference call will be Craig Smitty, President and CEO, Frank Cedaro, Chief Financial Officer, and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir. Okay, Joe, thank you, and good afternoon, everyone, and welcome again to Old Republic Third Quarter Earnings Call. During the quarter, we produced $227 million of consolidated pre-tax operating income, and that compares to $248 million. And our consolidated combined ratio was 96.1, and THAT compares to 95.3. Our annualized operating return on beginning equity continues to stand at 12.1. That's identical to last quarter. And for the first nine months of year growth in book value per share including dividends stands at 5.7 percent we continued to benefit from favorable prior year reserve development both in specialty insurance and title insurance and we think this continues to reflect our underwriting and reserving discipline And as usual, Frank will provide more detail on reserve development in a few minutes. Specialty insurance net premiums earned were 9.7% higher compared to the third quarter of 25. But later in the call, when I discuss specialty, I'll provide a little more context around that premium growth for you. Specialty produced $204 million of pre-tax operating income, and that compares to $208 million, with a combined ratio of 96, which compares to 94.8. For specialty, competition remains active across much of the marketplace, although conditions do vary by line of coverage. And legal system abuse continues to put pressure on severity loss trends on our liability lines of coverage, and frankly, those trends are more relevant to us than the competitive environment. In title, title net premiums and fees earned were 7.3% higher compared to the third quarter of 25. And Title produced $50 million of pre-tax operating income compared to $46 million, with a combined ratio of 96.1 compared to 96.4. So while Title continued to produce solid results, the recent increase in mortgage interest rates does create some uncertainty regarding transaction volumes as we go forward, but we think our title business has demonstrated over many decades an ability to remain profitable and adapt through a variety of housing and mortgage rate environments. And of course, Carolyn will provide additional perspective on the market and titles operating results later in the call. So with that, Frank, I think I'll turn the discussion over to you, and then you can turn it back to me to discuss specialty and we'll follow that with carolyn who'll discuss title so uh frank over to you thank you craig and good afternoon everyone this morning we reported net operating income of 181 million for the quarter compared to 197 million last year on a per share basis comparable quarter over quarter results were 73 cents compared to 78 cents starting with investments. Net investment income increased 1.5% in the quarter. However, if you exclude a few unique investment charges, net investment income would have increased by about 4%. The increase was due to a larger investment base, partially from the timing of our debt refinancing, and to a lesser extent, higher bond yields. Our average rate on corporate bonds acquired during the quarter was 5.4% compared to the average yield rolling off of about 4.4%. The total bond portfolio book yield ended the quarter at nearly 4.9%, up about 10 basis points from year end. Turning now to loss reserves. Overall, the consolidated combined ratio in the quarter benefited 1.1 points from favorable development compared to 2.5 points of benefit last year. This was a result of higher favorable development from title insurance and a lower level of favorable development specialty insurance. Now while the level of favorable development for specialty insurance was lower than we experienced in recent years, it is within the range of our expectations relative to our long-term target. Now digging into specialty coverages. Property continued to have significant favorable development that was higher than prior year. Workers comp had a solid level of favorable development but was significantly lower than what was experienced last year. Commercial auto had favorable development, that was in line with last year, while general liability and financial indemnity had elevated levels of unfavorable development. We ended the quarter with book value per share of $24.65, which inclusive of regular dividends, represents an increase of 5.7% since year-end. This increase resulted primarily from solid operating earnings and the impact of the bargain purchase gain on the ECM acquisition, and that was partially offset by lower bond valuations related to the current interest rate environment. In the quarter, we paid $76 million in dividends and repurchased $114 million worth of our shares. Since the end of the quarter we repurchase another $60 million worth our shares and that leaves us with about $460 million remaining in our current repurchases program. I'll now turn the call back over to Craig for a discussion of specialty insurance. Okay. Thanks, Frank. So specialty insurance net premiums written were up 10.5% in the quarter. However, as I indicated earlier, to give you a little more color around that, that figure includes ECM for the first time and also strong growth in our auto warranty business. So if we exclude ECM and we exclude the write-up portion of our auto warranty business, net premiums written were up 4.4% in the quarter. So we think that's a growth rate that aligns with where we're at in the P&C underwriting cycle today. We saw strong rate increases on commercial auto and general liability, and I'll talk about both of those lines individually in a moment and our overall retention ratios came in as expected and in line with the second quarter so to provide some more color around our auto warranty business just want to remind everybody that Old Republic's participated in this market for many decades through vehicle service contract programs with auto dealers and administrators and recently we made a strategic decision to increase our presence in that market by partnering with market leading administrators with capabilities that align well with old republic's capabilities frankly we view this business as an attractive source of growth and diversification because its performance is less driven by the pnc underwriting cycle that we see and more by the quality of our partnerships with administrators and the quality their underlying programs. As mentioned in my opening remarks in the quarter specialty pre-tax operating income was 204 million while the combined ratio was 96%. The loss ratio for the quarter was 64% which included 0.8 percentage points of favorable prior year loss reserve development and that compares to 63.5 percent in the third quarter last year when we included 3.4 percentage points of favorable development the expense ratio for the quarter was 32 percent compared with 31.3 percent in the third quarter last year as you saw in the release we began to provide an additional combined ratio analysis excluding the impact from the retail write-up portion of our auto warranty business we did this because we reached an inflection point where the impact on the expense and loss ratios from this portion of our auto warranty business started to become more material due to the significant growth in those programs so with this exclusion as you can see in that supplemental exhibit the expense ratio was 29.9 compared to 30.2 in the third quarter of last year however there's also some additional items here to note and that is that there was a 20 million dollar credit charge in the quarter that increased the expense ratio by 1.4 percentage points while changes in myths decreased the expense ratios somewhat in the quarter and if you're comparing to the third quarter 25 as a reminder there was a true up of seating commission in that third quarter of 25 that increased our uh third quarter 25 expense ratio by 0.9 percentage points so some moving uh pieces there uh turning to commercial auto our commercial auto net premiums written were up 5.7 percent a quarter while the loss ratio came in at 71 percent compared to 68.3 in the third quarter last year auto liability severity loss trend continues to be impacted by legal system abuse and as we continue to closely monitor this trend as we have for for many years now we also continue to maintain our risk selection and pricing discipline when it comes to commercial auto during the quarter we achieved rate increases for commercial auto in the mid-teens which remain above our view of observed and anticipated loss trends at the same time retention ratios remain stable near 80 percent so we think these results reflect a market that is rational and generally supportive of our pricing actions as we continue to benefit from favorable prior year reserve development in commercial auto i'll point out that we've had at least 16 consecutive quarters of favorable prior-year reserve development commercial auto and we think that provides some evidence that our historical underwriting and reserving practices have remained appropriately cautious in in the commercial transportation market economic factors continue to vary conditions are probably most favorable for large fleet operators while small operators particularly those operating one to five units face greater economic pressures because we serve the full spectrum of commercial transportation market we're able to observe these conditions across a broad range of operators and adjust our pricing and growth strategies accordingly now turning to workers compensation Our workers' compensation net premiums written were up 7% in the quarter, while the loss ratio came in at 62.7% compared to 63.8 in the third quarter last year. In the quarter we gave up rate in the low single-digit range on workers' comp because as severity trends remained constant, frequency trends continued to decline and wages continued to increase. So, bottom line here is we think our rates remain adequate relative to these loss and exposure trends that we're observing. Moving on, generally speaking, we're very pleased to have successfully closed the ECM transaction this quarter, which, as we noted in the release was accretive to book value per share and earnings per share. And our newer startup operating companies continue to make good progress. Although these businesses are still relatively small, if you look at it in the context of Old Republic, collectively they have grown approximately 40% year to date. So to us, that's evidence that the investments we've made over the past several years are gaining traction and will continue to contribute more meaningfully as we go forward. So overall, we continue to see a competitive P&C marketplace and we remain focused on cycle management and risk-adequate pricing that will continue to produce profitable combined ratios. So with that, I'll now turn the discussion over to Carolyn to report on title insurance. Thank you, Craig. Title reported premium and fee revenue of $823 million for the quarter, an increase of $7 million compared to the third quarter of 25. Interest rates remain elevated throughout the period and moved modestly higher following the Federal Reserve September rating increase. Despite the higher rate environment, our title operations delivered solid growth driven by continued strength in the agency channel, where revenues increased 9 percent compared to third quarter of 2025. Revenue from our direct operations was flat compared to the prior year period. Commercial premiums represented 24 percent of premiums earned during the quarter compared to 26 percent in the previous year period . We continue to see a strong pipeline of commercial transactions with a diverse mix across many segments of commercial real estate market. Agency generated premiums represented 81% of title revenues during the quarter compared to 80% in the third quarter of last year. Our loss ratio improved by 60 basis points this quarter compared to last year driven by higher levels of prior year favorable development reflecting our consistent and conservative reserving practices. Our expense ratio of 94% was up slightly over the 93.7 we achieved in the third quarter of 25. The growth in our agency business increased our agent commissions and contributed an additional 1.7 percentage points to the expense ratio as agency revenues represented a larger share of our title revenues. This increase was substantially offset by a 1.4 percentage point improvement from our continued focus on operational efficiency and disciplined expense management, resulting in a quarterly combined ratio of 96.1 percent. Year to date, our combined ratio has improved to 96.9 percent, reflecting continued progress toward our long-term objective of achieving a combined ratio below 95 percent. Investment income increased marginally in the quarter. All these items produce pre-tax operating income for the quarter of $50 million, up from $46 million in the third quarter of last year. As we move into the final quarter of 2026, we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with Qualia and the continued rollout of our new operating system. began earlier this year and will continue to the end of next year strengthening our foundation for long-term success thank you and I'll now turn it back to Craig all right thanks Carolyn so the fundamentals and specialty insurance remains strong as we navigate a competitive PNC marketplace and our focus continues to be on cycle management and rate adequacy to achieve combined ratios within our target range and in title similar story a title continues to carefully manage expenses to bring the combined ratio within our target range as we navigate the headwinds of higher mortgage interest rates so with that we'll now be happy to take any questions and either I'll I'll answer your question or I'll ask Frank or Carolyn for some help. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Gregory Peters with Raymond James. Your line is now open. Please go ahead. Good afternoon. I will focus my first question on the specialty insurance segment in the top line. And you called out the effect of ECM and also the auto warranty business as it relates to the third quarter. I'm curious what your expectations are for those two components for the next couple of quarters. Are we going to expect a continuing lift to the underlying organic revenue growth of your organization as we go through the next couple quarters or those one-time deals? Thank you for the question, Greg. And the short answer is yes. You can expect a continued lift from here on out. The growth within the auto warranty business is going to continue at a robust pace. And ECM will continue to contribute to top line and bottom line as we go through the subsequent quarters. And you may recall one of the reasons that our acquisition of ECM came to being is they have done a lot to prepare themselves for future growth and they were somewhat capital constrained and this acquisition provides them with the necessary capital to move forward with their strategic initiatives on several fronts. So we expect some growth. And part of that capital constraint on ECM was their need to have a quota share in place. So we no longer have that quota share in place, so that too will add to the net top line and bottom line as well. So we should see, again, good continued growth in both of those areas and with respect to how that changes the top line for specialty and how it influences the loss ratio and expense ratios, we'll continue to provide the supplemental information so you can see things with and without. Okay. The other very important area to cover would be the language that you included around the expense ratio in the third quarter. You call out a bunch of moving parts, and so I I was just looking for more detail. First of all, the credit loss is kind of a surprise. And curious if there's anything, there's some underlying issues that you're growing concerned about there. And then, you know, when you talk about the tech spend and all that, just curious how this expense ratio should look over the next several quarters. Sure. So with respect to the credit loss, it was a loss that needed to be recognized under expense under the GAAP accounting rules. So these are highly infrequent types of events for us. We, as you know, manage collateral very conservatively. And in this case, there was one unique program that had very poor performance and, as a consequence, was in a collateral deficit. position that we have, as of so far, been unable to rectify. So we took the conservative position and put up what we believe to be the ultimate loss for that program, assuming no recoverables beyond the collateral that we had. And so we don't expect that to have any further developments. And we don' see this as a systemic type of situation at all. So that's a little bit about the credit. With regard to the overall expenses, I'll probably begin to focus a little bit more on what our expenses are after we exclude the auto warranty right up to retail because as I said in my opening comments, it's just hit an inflection point where it's material to the reported expense ratio and having a level set on what things would look like we weren't growing that business i think is is um at least how we look at at things here so um if you look at the expense ratio for um the first nine months um without that retail write-up business um you're below a 30 and and right at about the 30 for the quarter so i think the um uh if you you take away some of those other things like the credit laws i think nine months uh year to date expense ratios uh uh after excluding the uh the auto warranty write up are are more in line with where things uh hopefully will be as we move forward so i think i've said we are working very hard to try to keep that below a 30 and we will continue to do so um well those are my two questions i'll requeue for a follow-up thank you thanks greg as a reminder if you would like to ask a question please press star 1 to raise your hand and please pick up your handset when asking a question to allow for optimum sound quality your next question is from the line of paul newsom with piper sandler your line is now open please go ahead good afternoon thanks for the call guys the the uh the ecm and the mortgage businesses it's fair to assume that those businesses had had an improvement or a deficit of the combined ratio, are they having an impact on the bottom line for the combined ration, or is it just a rejiggering of losses and expenses? The ECM is producing results that are right in line with our target results. So you can make the assumption that that will be the case going forward. So far this year, they have produced combined ratios right within that range. And we've had limited weather activity, as you know. They are exposed a little bit more to weather than usual within our portfolios. But they've had very good weather results and as such are having a very, very good year and we expect them to continue down that path. I was hoping to ask maybe a bigger picture question where we can kind of step back, Craig, Think about sort of the company within the overall property casualty cycle. We're talking about special and commercial, obviously, not just the title. And, you know, where you are from a profitability perspective and how you think that profitability will evolve over the next couple of years with the, you Know, current pricing soft market. And because we're – the combined ratio is sort of – even if we pull out the – what do you call it – excess expenses related to the efforts to have a whole bunch of new businesses, which are great for the future, it looks like we're kind of top of the range from a combined ratio perspective. um you know if the goal is to get back to someplace in between the goal how does that work out from a cycle perspective you think do you think we have a be a little patient maybe go above the range for a bit before we can get into um kind of a normal position or do you think there's some other things that could happen along the way um given we are from a big picture perspective and i'd like to not ask about the quarter per se really the years sure sure i appreciate the question and i understand it um yeah i think you know where we'll end the year hopefully we'll be within our our range for the year we've done a very good job looking back uh over over the prior years of producing some very decent combined ratios over the last several years and you know our overall philosophy is is to again be between that 90 and 95 depending on where we're at in the cycle right now it It would appear we're at the top end of that, and we're going to work very hard to not exceed the top-end as we persevere through a softer market in the next few years. And we're currently in the process of planning with each of our operating companies, 21 different operating companies and putting together plans and making realistic assumptions about rate pressure. So, you know, our view is we would not expect to exceed that range as we move through the next few years of a soft market. That's what we're going to work hard to do. The big variable to all of that is is top line and as we as i mentioned um as we try to to maintain pricing discipline um top line could could uh uh suffer and that's really the wild card here is if if top line would fall off during the uh softer years in the cycle it could push push that combined ratio up a bit driven by the expense ratio but we're keeping an eye on expenses we're doing everything to maintain a profitable loss ratio and um you know we're sticking with our our top end target that in the softest part of the cycle we want to be at a 95 or below so that's how we're thinking about it um and uh as i indicated in my earlier remarks um what we're focused on more than uh competition and and and trying to be price competitive is selling our value proposition That's why we're diversified and decentralized into the specialty niches that are an inch-wide, mile-deep. We hope that our distribution partners and our customers are viewing us as a value buy as opposed to a price buy. and to the extent that we can sell our specialization and and the services that come along with that we think we'll we will come out the other end stronger and but at the end of the day we're going to stay focused on bottom line and and um uh the top line could suffer so far as I indicated, even if you look at commercial auto, you know, it appears the market's rational. We're able to get rate increases in the mid-teens on commercial auto rate increases in the Mid-Teens on general liability. And that's going to be our focus is rate adequate pricing. And we'll see what happens with the top line. But so far, you we've been able to to do okay on the top line and and as i also mentioned our new startups are starting to produce some meaningful premium that will give us a bit of a tailwind on growth right now those startups are are driving up the combined ratio because of uh the lack of premium relative to their expenses so the more that comes into balance and and the premium growth continues to to move along and those startup entities um you know that should help with again some tailwind on on top line even if our some of our other businesses might have to shrink a little bit so hopefully that answers your question absolutely thank you very much thank you paul as a reminder if you would like to ask a question please press star 1 to raise your hand and please pick up your handset when asking a question to allow for optimum sound quality your next question is from the line of gregory peters with raymond james your line is now open please go ahead Hey, Craig. Can we go back? If I look at the supplement or the specialty insurance segment, and I'm focused on the home and auto warranty portion, and you give the net written premium, and I am looking at year-to-date numbers of like 545.9, which is up materially from the 350 the year ago um what what is this what is what do we what does this book look like is it a is it 750 to 800 million dollar book is that where we're headed or is it going even farther than that well um you asked a uh a tough question um things are progressing very well on on the Let me clarify first that it is driven by auto warranty, even though we do put those two together. But auto warranty on a gross basis is growing significantly, and even on a net basis, you can see the growth you pointed out. We expect that to continue at a very meaningful clip. So looking at it on a net basis, you know, $600 million, $700 million in the next few years isn't out of the question, and even higher. So wait, $6 million, 700 million of annual premium or annual new premium? Annual premium. Okay. And and and then I guess just you go to the title business for a second, you know, with rates moving up a little bit, doesn't feel good for the real estate market and feels like there's pressure on forecasts going forward. I'm just curious if you have any different views on that. and that view on that position relative to how you see your book of business performing i would i would underscore a point carolyn made and that is that uh commercial is still coming in very strong and uh the pipeline looks robust um so fortunately we have the commercial tailwinds that are helping to offset some of the residential headwinds. So I know I've said many times over the last two or three years that it felt like there was pent-up demand in the residential market and that if interest rates had a five in front of them instead of a six, that it could be a major turning point for us. And now we're talking about having a seven in front of 30-year mortgage rates instead of sixes. So, you know, as I pointed out in my comments, as Carolyn pointed out, it does give us pause about where things might be heading. But we do have the commercial that is holding up very well, and we continue to play a very significant role on that business. And the only other thing I would point out that I'm sure Carolyn would echo is that what we're seeing right now, you know, we have a footprint in title on agency business that spans the entire country. and we're seeing some very big differences geographically so you know even if you look at our direct there's certain points in time where direct might be a leading indicator of where residential is going I would we we would not say that right now we would not say it's a good leading indicator because we're seeing too big of a delta between geographies, and we're very limited in our geography on direct. So, residential is driven by our agency, and depending on which marketplace you're talking about, some look pretty decent and others not so much. So it's a very diverse landscape right now on residential and certainly the higher 30-year mortgage rates are not helpful. But hopefully by the time commercial winds down a little bit, we'll be hopefully back into the sixes and residential will pick up again. And I would point out too, refi is not a big part of our portfolio. So to the extent that higher interest rates are depressing refis, you know, that that's not going to move the needle one way or another for us very much. Thank you for that detail. There are no further questions at this time. I will now turn the call back to management closing remarks okay well we um very much appreciate all of your attention and participation in in today's call and we're looking forward to uh our call next quarter where we'll be able to report our year-end results and uh we remain optimistic that um given all the things we've discussed today that um we'll have some good news to report um for year end and and final quarter so thank you very much and appreciate uh your involvement again thank you this concludes today's call Thank you for attending. You may now disconnect.